What Factors Influence Interest Rates?

Filed under: Market Comentary

After our discussion last week about how the Fed rate changes don’t have a big effect on mortgage interest rates, I thought it would be a good topic to discuss the things that DO impact interest rates.

This topic gets a little complicated. But, ultimately interest rates are driven by the things that are happening in the mortgage-backed securities. If you want to anticipate mortgage rate changes, you need to watch movement in the financial markets that affect mortgage-backed securities.

What Changes Mortgage Interest Rates?

So, the question is: what moves those mortgage-backed securities?

There are fixed-income bonds or equities in the financial market. Generally, these things move in the opposite directions. If people are feeling great about the economy, then they are feeling better about putting their money into the equities market. In this situation, people are less interested in a long-term fixed bond, so they move their money from bonds to equities. This trend has been happening lately as people are feeling more confident in the current economy.

Inflation is the other thing that has a big impact on interest rates. I would say that inflation is the arch-enemy of interest rates. So, when inflation risk is there, then it is something that needs to be addressed because of the impact it has on mortgage interest rates.

What it boils down to is this: how do large investors feel about the economy? Things can happen on a daily basis that drives the trends across the country. So, I’m always watching out for factors that could influence rates. For example, this morning was the third adjustment on GDP, which is a big one since it has inflation factors in there.

What does this all mean for my clients, Realtor partners, and business connections? I’ve seen that people buy houses whenever it makes sense to buy a house based on the timing of life events. I’m here to lock in a rate accordingly. So, I’m always looking to see if it makes sense to lock in the rates today or tomorrow, but it’s always risky just to let it run because we never know where things are really going.

Hopefully this information gives you a general sense of how things work in the industry. Obviously, we have zero control over which way the rates go. But, we do have control over the timing of when we lock you in to get the best rates that are available at the time.

Do you need help with getting a good interest rate? Call me today! Also, like or share this video to spread the love. Thanks!

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